India and EU Forge New Trade Agreement: What Does MFN Treatment Mean?

India and the European Union have reached a significant trade agreement that includes granting each other Most-Favoured-Nation (MFN) status for five years. This arrangement aims to ensure fair treatment in trade services and includes provisions for a Joint Committee to review the agreement's impact on various sectors, including education and service providers. The deal, finalized last month, seeks to lower tariffs and enhance market access, ultimately boosting trade and investment between the two economies. Explore the implications of this landmark agreement and what it means for future trade relations.

By Narendra Chaudhary Feb 28, 2026, 10:55 IST

New Trade Agreement Between India and the EU

Mumbai: India has reached an agreement with the European Union to grant each other Most-Favoured-Nation (MFN) status for a period of five years following the implementation of their anticipated free trade agreement (FTA).

This initiative is designed to promote equitable treatment in the trade of services between the two parties.

With the MFN clause, service sectors and providers from both India and the EU will receive treatment that is at least as favorable as that given to any other nation.

This stipulation ensures that neither party can offer preferential treatment to a third country without extending the same advantages to the other, subject to specific conditions.

However, it is important to note that MFN treatment will not extend to issues related to tax treaties, mutual recognition of standards or authorizations, and dispute resolution processes.

Additionally, the agreement permits both parties to offer special benefits in border regions for services that are locally produced and consumed.

This provision is included in the Trade in Services chapter of the FTA, which was publicly disclosed on January 27.

A Joint Committee will be established to review the agreement in its fourth year.

This review will address topics such as the entry and residency of Indian students in the EU, their employment rights, and the regulations governing the temporary movement of service providers.

Following this assessment, the Joint Committee will determine whether to extend the MFN treatment beyond the initial five-year term.

Either party may also initiate a review if circumstances arise that adversely affect their interests. Should the Committee choose not to renew the arrangement, the obligation to provide MFN treatment will cease, although previously granted benefits will remain intact.

Last month, India and the European Union finalized a long-awaited free trade agreement aimed at reducing tariffs, enhancing market access, and fostering increased trade and investment between the two economies.